The fortunes of South African shipbuilders are tethered to the ebbs and flows of transport and defence spending, and activity at ports. The tide may be turning as economic growth edges up and Transnet plans to improve its ports.
The signs are there. In September the R1bn ship renewal programme of the Transnet National Ports Authority (TNPA) delivered two new tugboats to East London. They were built by Damen Shipyards Cape Town. This followed the August delivery of five tugboats to Durban, bringing to completion the delivery of 38 tugboats to eight ports. Also in August, Sandock Austral Shipyards delivered two launch boats to the TNPA.
But local shipbuilders have excess capacity and a thirst for new orders.
Sandile Ndlovu, CEO of the South African Aerospace, Maritime & Defence Industries Association, says the industry, operating in Cape Town and Durban, used to attract foreign investment. But he was uncertain how many would still be keen to invest “in light of the challenges we have”. These include the government’s budget pressures and the navy’s reduced ability to procure services. Among the main challenges are port management, overcrowding and congestion, and “exorbitant” Transnet rates, rendering the industry unable to compete internationally, Ndlovu says.
There is hope for positive change, centred on high expectations for the Border Management Authority — though it is short of R4.35bn over three years, home affairs minister Leon Schreiber told parliament — and the navy getting more for building and maintenance. The navy has recently been a focus of attention after news broke that it had lost much of its seagoing capacity.
We have a healthy number of companies with production capacity
— Sandile Ndlovu
There is also interest from the rest of Africa and elsewhere (mainly from Brics countries), Ndlovu says. “We are speaking with players in Mozambique, in West and East Africa, and even the Democratic Republic of Congo to provide facilities in the Congo River where ferries are required.”
He adds: “We are an industry full of potential, which is not fully exploited. We have a healthy number of companies with production capacity.” Ndlovu says that while there are opportunities outside South Africa, the industry needs local opportunities. Companies want to get export opportunities, where the growth and the margins are.
Ndlovu says opportunities have also been lost in Africa because the industry requires co-ordinated government support, which is not always available.
Damen Shipyards director Sefale Montsi says the company’s client base is primarily government, with most revenue earned from defence and the TNPA. It has been building vessels for the navy and delivered a dredger and tugboats to the TNPA. It is completing the final vessel of three ordered by the navy and is “ready to do much more work as the finalisation of this project will open up more capacity for us”, she says.
Montsi says one of the requirements of Operation Phakisa, which aims to unlock the potential of South Africa’s oceans, is for a structured vessel acquisition plan to be made available to the industry to enable it to plan according to government requirements.
Damen invested in South Africa in 2008 and Montsi says the company has “a lot more capacity to deliver”. She says shipbuilders can help to resolve some of the issues facing South Africa.
Ndlovu says he has been involved in talks about public-private models, which he hopes will materialise. A development that could affect shipbuilders is a long-mooted move to shift the naval base from Durban to Richards Bay. This could have repercussions for local shipbuilders that may need to set up facilities near the new base, should this ever come to fruition.
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